Unemployment occurs when a person is available to work and seeking work but currently without work.The prevalence of unemployment is usually measured using the unemployment rate, which is defined as the percentage of those in the labor force who are unemployed.

The unemployment rate is also used in economic studies and economic indices such as the United States' Conference Board's Index of Leading Indicators as a measure of the state of the macroeconomics.

Though there have been several definitions of voluntary and involuntary unemployment in the economics literature, a simple distinction is often applied. Voluntary unemployment is attributed to the individual's decisions, whereas involuntary unemployment exists because of the socio-economic environment (including the market structure, government intervention, and the level of aggregate demand) in which individuals operate.

Structural US unemployment is caused by a mismatch between jobs offered by employers and potential workers. This may pertain to geographical location, skills, and many other factors. If such a mismatch exists, frictional unemployment is likely to be more significant as well.

Productivity gains in steel may reduce the number of jobs in steel, but they create jobs elsewhere (if only by lowering the price of steel, and therefore releasing money to be spent on other things); advanced countries may lose garment industry jobs to developing-country exports, but they gain other jobs producing the goods that those countries buy with their new export income. To observe that productivity growth in a particular industry reduces employment in that same industry tells us nothing about whether productivity growth in the economy as a whole reduces employment in the economy as a whole.

Unemployed individuals are unable to earn money to meet financial obligations. Failure to pay mortgage payments or to pay rent may lead to homelessness through foreclosure or eviction. Unemployment increases susceptibility to malnutrition, illness, mental stress, and loss of self-esteem, leading to depression. According to a study published in Social Indicator Research, even those who tend to be optimistic find it difficult to look on the bright side of things when unemployed.

There is a connection between economic growth and unemployment. There is a connection between growth and inflation. Therefore, commonsense (and financial theory) goes, there must be a connection between inflation and unemployment. A special measure of this connection is the Non Accelerating Inflation Rate of Unemployment (NAIRU). Supposedly, this is the rate of unemployment which still does not influence inflation.

High unemployment can encourage xenophobia and protectionism as workers fear that foreigners are stealing their jobs.[citation needed] Efforts to preserve existing jobs of domestic and native workers include legal barriers against "outsiders" who want jobs, obstacles to immigration, and/or tariffs and similar trade barriers against foreign competitors.

The ILO describes 4 different methods to calculate the unemployment rate:

• Labour Force Sample Surveys are the most preferred method of unemployment rate calculation since they give the most comprehensive results and enables calculation of unemployment Statitics by different group categories such as race and gender. This method is the most internationally comparable.

• Official Estimates are determined by a combination of information from one or more of the other three methods. The use of this method has been declining in favor of Labour Surveys.

• Social Insurance Statistics such as unemployment benefits, are computed base on the number of persons insured representing the total labour force and the number of persons who are insured that are collecting benefits. This method has been heavily criticized due to the expiration of benefits before the person finds work.

• Employment Office Statistics are the least effective being that they only include a monthly tally of unemployed persons who enter employment offices. This method also includes unemployed who are not unemployed per the ILO definition.

Unemployment may have advantages as well as disadvantages for the overall economy. Notably, it may help avert runaway inflation, which negatively affects almost everyone in the affected economy and has serious long-term economic costs. However the historic assumption that full local employment must lead directly to local inflation has been attenuated, as recently expanded international trade has shown itself able to continue to supply low-priced goods even as local employment rates rise closer to full employment.